Progress on Tax Incentive Reforms? Maybe, Maybe Not

Brenda Flanagan, NJTV News | October 21, 2019 | Budget
Governor suggests Democrats are close to a consensus on replacement programs; Senate president says no agreement yet
Credit: NJTV News
Gov. Phil Murphy

Gov. Phil Murphy on Friday renewed his criticism of the state’s former economic incentive programs and reported progress in resolving the stalemate between his administration and lawmakers over devising replacements that limit the potential for abuse.

But his chief adversary in the intra-party squabble over the future of the now-expired tax breaks, Senate President Steve Sweeney, immediately tempered the governor’s optimism, saying that although conversations have taken place, he has not signed off on any specific proposal.

The first-term governor made his comments the day after a task force he commissioned to investigate administration of  the incentives by the state Economic Development Authority held another in a series of hearings showing how some companies and consultants regularly gamed the programs, reaping millions in undeserved tax breaks.

“Enough, already. This is one bad fact, one bad story, after another,” Murphy said during a tour of the Hoboken Business Center, home to 100 small startups. “It is just more proof that the last system — and how it was executed, not just the incentives but how they were executed — it was failed.”

The governor suggested he and fellow Democrats who control both houses of the Legislature were moving closer to a consensus on major reforms in how New Jersey attracts and grows businesses through the EDA. He said talks are in “a good place.”

‘High time’ to find agreement

“We’ve had very productive conversations with our legislative partners, and those conversations have borne fruit,” he said. “But it’s high time; we’ve got to get this over the goal line.”

Sweeney on Friday was just miles away, addressing a Commerce and Industry Association of New Jersey luncheon in East Rutherford, saying the state needs to be more welcoming to businesses.

Asked about the status of talks with the governor, Sweeney said, “I would say we did have a productive conversation, but we don’t have any agreement on anything at this point.”

Sweeney, who appointed a special Senate committee to explore the tax incentive issue, also said he would not post any bills incorporating reforms until the governor’s task force has issued its final report, which could be weeks away. The Senate committee meets again next month.

Against the wishes of his party’s legislative leaders, Murphy opted not to renew the two scandal-plagued incentive programs when they expired in June.

To cap or not to cap

As he toured the business center in Hoboken, Murphy said the businesses based there would benefit from the package of reforms he favors, including an “evergreen fund” to attract venture capital and tax incentives to spur brownfields redevelopment and historic preservation projects. He is also seeking to cap the amount of revenue that can be allotted to the incentives each year to cushion their impact on the state budget.

Sweeney and other legislative leaders have called hard caps a non-starter.

“Once you cap an incentive program, it limits companies that might want to look at New Jersey, that might be good opportunities for New Jersey,” he said Friday. “So, for me, the cap is a sticking point.”

Sweeney, too, said it was important for the state to have functioning business incentives in place. And he echoed the governor in the need to prevent abuses.

“Any company that games and cheats the state of New Jersey shouldn’t just pay the money back,” he said. “They should be paying interest and penalties.”